A January 2010 opinion editorial, “Don’t deregulate insurance: Consumers only ‘choice’ would be bad” bylined by three consumer advocates totally misses the mark on the benefits of the Consumer Choice bill.
The measure, proposed by Sen. Mike Bennett and Rep. Bill Proctor, is designed to attract new property insurance companies to Florida and prevent others from leaving by leveling the playing field and offering consumers more choices.
The bill, HB 447, would still require the Office of Insurance Regulation to manage unfair discrimination and to oversee protective measures, ensuring the industry’s continued financial stability. Competition drives premiums down and at the same time the Consumer Choice bill will give carriers the flexibility to increase rates when appropriate to guarantee their ability to pay claims in the event of a big storm or natural disaster.
OIR Commissioner Kevin McCarty recently indicated that 102 of 200 Florida carriers were suffering net underwriting losses. And there’s more to the story – a recent analysis by the Florida Association of Insurance Agents (FAIA) shows less than 75 private carriers – not including Citizens and State Farm that are also losing money – write 98 percent of the residential policies. At least 44 of these carriers recorded underwriting losses through the third quarter 2009, with some experiencing sharp declines in their surplus all during a period in which no hurricane losses have occurred.
Instead of building surplus so we can pay claims after the next big one, Florida has squandered the opportunity with political rate suppression.
So, what will happen when the wind blows? The answer is simple—without the Consumer Choice bill – consumers will be left hung out to dry.
Without the Consumer Choice bill property owners will be forced to choose from a limited list of carriers in the voluntary marketplace and in many instances could still wind up in Citizens. The proposed measure is an innovative idea that will work to bolster the voluntary marketplace, creating competition and ultimately driving the cost of insurance premiums down. We support stabilizing Florida’s insurance market and protecting consumers from paying unnecessary taxes.
Currently, Citizens is required to levy a first tier assessment on its own policyholders to offset any deficits subject to a cap of 15 percent of the premium. Unfortunately, there is a loophole that allows policyholders to escape this assessment simply by dropping their policy – leaving those who remain in Citizens to make up the shortfall. This imposes a heavier burden on remaining Citizen policyholders and those in the private market. In essence, policyholders have a choice between private market carriers that are losing money or a Citizens insurance fund that will teeter on bankruptcy in the event of a hurricane.
This is the poor choice that consumers have today.
The Consumer Choice bill fixes this unintended consequence, while giving everyone a choice to buy a policy from a solvent, competitive insurer. That’s real choice.
We agree with consumer advocates that a failed system exposes consumers to very serious risks in the event of a natural disaster because so many property insurers are experiencing financial difficulty at a time when they should be building surplus to pay claims. Last year 85 percent of lawmakers supported Consumer Choice and a Florida Chamber of Commerce poll showed that 60 percent of voters wanted the governor to sign it.
We urge consumer advocates and policymakers to examine closely whether the current system is worth defending or whether it’s time to give consumers a real choice for a change.
Gunter is the chairman of the Florida Association of Insurance Agents. He also serves as chairman of the board of Rogers, Gunter, Vaughn Insurance Inc. He is a former state treasurer and insurance commissioner.
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